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By: Roy Engel, Barnea Jaffa Lande & Co.

The cornerstone of a successful hedge fund is a successful investment strategy. That is self-evident. However, if the managers of the potential hedge fund are not successful in raising capital, this potential will never be tested or realized. We list below the five key points we believe hedge fund managers should take into account when raising capital for their funds.

# 1 Follow the Money

It is critical to be "user-friendly" (a.k.a. "investor-friendly") in your approach to potential investors. This means that your fund structure should be geared to address your investors' tax and other possible concerns. To do so, first identify the tax jurisdictions of your main investors. Then consult with your tax adviser to understand better the tax preferences of potential investors. For example, certain types of investors prefer tax flow-through structures while others do not. Experienced tax advisers can assist in planning a single structure that can address seemingly non-congruent concerns of different investor types. Consult your counsel as well for potential non-tax concerns that your structure should also address.

For example, certain types of investors may prefer to make their investments into entities formed in certain jurisdictions. Again, here too, experienced counsel can plan your fund structure in a manner that "follows the money" in the sense that it will be "user-friendly" from your investors' perspective.

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